New Hotels Keep Pace With Southland Growth : Major lodging investors explore broader options to meet travelers needs
The lodging industry in the mid-1980’s continues to show an ever-changing profile, turning from an entrepreneurial tradition to one dominated by hotel chain operators seeking diversification.
For major-league hotel investors, the crux of successful hotel development these days is getting in on a lion’s share of all market segments or, in other words, getting a larger piece of the action.
“It is a conscious business decision--and financial institutions are buying it--as it becomes more apparent that hotel properties can be more successful than successful office buildings,” commented Thomas M. Goff, a senior principal at Laventhol & Horwath and the accounting firm’s regional manager of overall consulting services.
“But you can no longer throw your standard hotel room in with the competition. Developers must be willing to take the higher risks of experimentation and expansion for higher returns,” he said.
The current hotel construction boom, including major projects completed in 1984, will add almost 10,000 rooms in Los Angeles and Orange counties this year.
Hotels in the Los Angeles area that havebeen augmented and refurbished include the prestigious Bel Air Hotel, the Beverly Comstock and the Holiday Inn Bayview, to name a few. The Sheraton chain opened its Sheraton Grande down town and its Sheraton Premiere inUniversal City, and the 750-room Century Plaza Hotel added a new $80-million, 322-room Tower to its existing hotel complex.
The Ashkenazy hotel chain completed an addition to L’Ermitage in Beverly Hills and has added Le Mondrian, Le Dufy and the Bel Age to its chain of Westside luxury hotels.
Hollywood, with its enduring mystique and a tourist draw in excess of 1 million a year, has its newly-opened 140-room Hotel Hollywood on Sunset Boulevard across from Metromedia, and is the first high-rise hotel to be built in that community in the past decade. Another project scheduled for completion in December is the 400-room landmark Hollywood Roosevelt Hotel, currently undergoing a $40-million renovation.
Woodland Hills’ Warner Center in the San Fernando Valley is the setting for a new major chain hotel, the 473-room Marriott Warner Center, scheduled for a grand opening in February.
The Southland has its share of major attractions, the best freeway system in the country and major airport systems. At this point, Los Angeles International is probably the strongest airport community in the United States, Goff noted, with more hotel rooms concentrated in one area and most tourists deplaning and staying in the area. The airport lodging boom continues; four major hotels have been built there in the past two years, including a 1,281-room Hilton facility.
The Palm Springs area is seeing its first major hotel development since the opening of the Sheraton Plaza five years ago (see accompanying story on desert communities); San Diego’s expanding economy and the anticipation of its long-awaited Convention Center (with 250,000 square feet of exhibit space and 100,000 square feet of meeting space scheduled for completion in 1988), has captured the attention of major hotel companies.
Downtown San Diego is being enhanced by the $12-million reconstruction of the 100-year-old Horton Grand, opening next spring; the renovation of the U. S. Grant hotel due for an opening in December; a second tower being added to the Inter-Continental; an Omni International with a building start in November, and the newest hotel in downtown San Diego, the Best Western Columbia Hotel. Nearby, the Marriott in La Jolla is among the first-class hotel projects for that area.
In Orange County, the $100-million Ritz Carlton in Laguna Niguel is drawing considerable attention as a luxury destination hotel. Besides the Ritz-Carlton, the $60-million Four Seasons is being built by the Irvine Co. at Newport Center, and a 363-room Westin South Coast Plaza is to be built soon. Disneyland is still a draw, but no longer does the county rely exclusively on the famous theme park and surrounding attractions to fill its rooms. The hotels are now being geared to accommodate major business development.
The coastal area of Ventura County that is becoming known as the Gold Coast of California (between Malibu and Santa Barbara) is showing increased lodging development. Harbortown in Ventura is a prime example and an Embassy Suites is a new project for Oxnard.
Studies conducted by Laventhol & Horwath indicate that the scale is tipping in favor of the commercial guest demand over the tourist segment, due partially to the strength of the dollar.
Business has done a lot for the lodging industry, mostly by exposing more people to Southern California. “Business travelers who only get a taste of the good weather but don’t have time to enjoy it, look forward to bringing their families back on vacation. We now look at the extended-stay tourism for the business person,” Goff said.
Until the 1970s, resort properties were non-chain and independently owned, appealing primarily to the elite and leisure economic group. But when the trend for corporate and association meetings changed, away from the foreign scene and the cities to resort destinations within the United States, investments were begun by major chains like Marriott, Westin, Sheraton and Hilton, which had the big convention and conference hotels in key cities. They either bought or built new resort facilities.
“One of the future growth areas in California lies in these resort hotels, as an alternative to offshore destination areas such as the Bahamas and Hawaii,” Goff stressed.
Hotel chains, especially the “venerable ones” that are in there hitting and trying to keep the bases loaded--Sheraton, Marriott, Hilton, Hyatt, Holiday Inn, Westin, Ramada Inn, TravelLodge, among them--are experimenting with new concepts and giving the traveling public their money’s worth.
Competition is at a high, with foreign money backing a substantial number of projects. Contenders, such as Quality Inns, Doubletree (Compri), Brock Residence Inns, Meridien, Inter-Continental, Sofitel/Novotel, Ibis, have provided options geared to a broad spectrum of travelers’ needs, from roadside inn and motor courts to major convention hotels, and even the independently-owned ma-and-pa hotel operations with 100 rooms or less, are not being scared off by the high-powered investors in the hospitality industry.
“Look at all the breadth of lodging options,” Goff commented. “Investors now try to incorporate it all in order to build their base of business. The hotel operation comes first and the real estate investment comes second, and they are expanding through franchising and management contracts.
“Holiday Inn Inc. purchased the Granada Royale for its Embassy Suites and is developing the Crowne Plaza in the upper mid-price range.”
Fine-tuning by hotel developers to the needs of tourist and business travelers, means providing attractive destinations and catering to a growing business and industrial community.
“The main attractions here, beyond climate, are the infrastructure and available land,” Goff said. “It is true that land availability has been scarce, but not inland from Los Angeles, Orange and San Diego counties.”
Additional factors that have allowed the lodging industry to enlarge its own scope of development are increased trade with the Pacific Rim countries, the stepped-up activity in the ports of Los Angeles and Long Beach, the initiative of worldwide banks to open more branches in California--all of which has resulted in a chain-reaction increase in business and employment opportunities.
